The Swamp Wins on Taxes and the Fed – Ep. 297

No Change in the Fed Swamp

The announcement of the new Fed Chair, Jerome Powell, represents a commitment to the status quo at the Fed.  President Trump has nominated the person most likely to do exactly what Janet Yellen did for President Obama. Powell has voted in lock step with Janet Yellen for the entire time she has chaired the Fed.  The only real difference between the two is that Yellen is a Democrat and Powell is a Republican, even though he was nominated to be on the Fed by President Obama.

Politics as Usual, Rather than Change

Powell does not have an economics degree.  Initially you might think that’s a plus; Bernanke and  Yellen have Ph.D.’s in economics, but they know nothing about economics because they learned from Keynesians. But Powell has hung out with these folks for such a long time, I assume he has all the same failures when it comes to understanding economics. More important than that is the politics of this.  Jerome Powell embodies everything Candidate Trump criticized about the Fed and about Janet Yellen. President Trump accused Janet Yellen of being political, keeping interest rates artificially low to make Obama look better and to help Hillary get elected, and all of that was true. This is why many people voted for Trump, they voted for change.  They thought that he was going to drain the swamp.  Well the water level at the swamp is not going down at all with the nomination of Jerome Powell.  Trump interviewed John Allison, who would have represented a change; he is a free market guy, and Austrian economist, Ayn Rand fan, he would have been a market change in direction at the Fed

Cut, Cut, Cut Plan

Now let’s turn to the sham that is the Tax Cuts. Donald Trump wanted to call the plan the Cut, Cut, Cut Plan. Instead, they named it the Tax Cut and Jobs Act. This plan will definitely create jobs for the accountants. I skimmed through the 450-page outline of this plan, and what I can tell you is I believe that taxes will be much more complicated if this bill passes than they are now.

Tax Savings Will Go to Accountants

For low income earners. this tax bill will not complicate already rather simple tax filings.  But if you have a small business with employees and capital investments, this bill will substantially complicate your tax filing. So to the extent that you might save any money on taxes, you will spend more on accounting fees, which by the way, are no longer deductible.

No Reduction in Size of Government

This bill is not the biggest tax cut in history, and it is not a tax cut for everybody. Many people will see a tax increase. Overall, the government will collect less revenue as a result of this bill, even though some people will be paying more. I watched Republicans claiming that this bill will provide relief from high taxes – there is no real relief because government doesn’t get any smaller. The reason tax payers have such a heavy burden to bear is because government is so big.  Since there is no reduction in the size of government, in fact, government is getting bigger, and will be bigger next year taxes should be going up on everybody! But Republicans are saying, ” No we’re not going to make government any cheaper, in fact we’re going to provide even more government, we’re going to make government bigger and more expensive, but we’re just going to relieve you of the burden of paying for it, which is impossible, because there are not free lunches. There are no free lunches from Democrats and there are no free lunches from Republicans.



Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.



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